Executive Mosaic’s GovCon Index fell -1.89% on Friday to settle at $4,495.05, a new low. The index, which tracks the stock performances of 30 major government contractors, lost -1.77% for the week and posted its fifth consecutive weekly loss. The decline in the Index of Consumer Sentiment due to higher inflation expectations was the headwind on Wall Street before the weekend.
Besides losing -2.5% for the week, the blue-chip Dow Jones Industrial Average shed 748.63 points on Feb. 21 for its worst day in 2025. The broad S&P 500 (-1.7%) and tech-heavy Nasdaq Composite (-2.5%) also recorded week-on-week losses. Year-to-date, the GovCon Index is down -7.08% and has yet to notch a winning week this month.
Top gainers
BAE Systems popped +9.26% Tuesday and gained +4.9% overall for the week following the pledge of France and Germany to increase defense spending due to geopolitical tensions. On Monday, the British defense, security and aerospace secured a new $251 million contract from the U.S. Navy to supply critical system engineering and on-site technical support to the AEGIS Technical Representative organization.
Lockheed Martin (NYSE: LMT), the week’s second-best performer with +4%, obtained contracts with the U.S. Navy. One is a $99.5 million cost-plus-fixed-fee, cost-reimbursable, indefinite-delivery/indefinite-quantity contract for continued modifications of various missile weapon systems. Sikorsky Aircraft, one of its companies, secured a not-to-exceed $232.4 million firm-fixed-price modification to a previously awarded contract supporting Lot 10 of the CH-53K aircraft for the Marine Corps.
Biggest decliners
Parsons (Nasdaq: PLTR) was GCI’s worst performer, losing -19% during the holiday-shortened trading week. The tech stock plunged despite the company’s record $1.7 billion revenue and $54 million net income in Q4 2024. However, management gave a weaker outlook, given the anticipated lower volumes on some contracts and a longer time to convert its backlog into sales.
The proposed military budget cut fueled the sharp selloff of Palantir Technologies (Nasdaq: PLTR). After hitting a new-all high time of $124.62 on Tuesday, the AI stock skidded the rest of the way. It lost -15% in four days. The software and services company specializing in big data analysis derive around 40% of its revenues from U.S. government agencies.
Proposed defense budget cuts
Defense Secretary Pete Hegseth instructed Pentagon leadership and military officials this week to develop plans for cutting the defense budget by around $50 billion or 8% over the next five years.
Some market analysts see near-term risks for the defense sector, particularly companies that rely heavily on U.S. government contracts. However, contractors with multi-year contracts from previous budgets have cushions against the shakeup.
